Dwayne Spradlin, CEO of InnoCentive, urges companies to create breakthrough solutions by collaborating with outsiders.

Question: What is open innovation?

Dwayne Spradlin: Open innovation is a notion that organizations that are traditionally looked inward to create products, to create scientific breakthroughs, things that advance their business typically are using people that look and act in certain way, it’s the four walls of the enterprise, the traditional not-invented-here. Open innovation tries to smash that paradigm and says you should be dealing with individuals and organizations from all over the world. What’s important is pushing your business or your foundation or your mission forward. It’s less important how you get the innovations you need to do that.

Topic: Becoming an open innovation company.

Dwayne Spradlin: An organization that wants to be an open innovation style company, as an example, will typically look at all of the projects in our portfolio, all the strategies, all of the ways forward, and they will portfolio manage those into different kinds of initiatives and agendas that need to be pushed forward as a business. Then they’ll choose very strategically which of those will go to the outside world, which to the inside world. They may decide a new line of business, really needs to be acquiring another company. That’s been done more traditionally.

But when you get down to brass tax and you say, we need a new surface material for a product we want to take the market, or we want to invite our customers in to help us redesign the next generation wireless network routing technology--that’s when organizations typically fall down.

In this new world, these large organizations are saying, from the top down, a substantial portion of our innovation is going to come from the outside world. We’re going to look at every one of our projects and we’re going to look for opportunities to put those in the outside. Actually, if we did it right, we’d say we should look for opportunities to do it on the outside, and only do some of those innovation in the inside if we have to. The organizations would structure so they’re better product management, the financial management. They should be calculating ROIs on every possible project.

Essentially realize then that you have an organization that’s focused on doing innovation wherever it happens, wherever it’s the best place to do the innovation.

Companies should really decide whether the world is their laboratory or the laboratory is their world. For companies where the laboratory is their world, they tend to be inward thinking. For the companies where the world is their laboratory, it’s an entirely different mindset and structurally their organized to make that happen.

Recorded on: June 3, 2009.